4/01/2006

Razing New Jersey: The Weekly Standard, 2/13/06

In which developers in league with city hall have come up with a curious definition of "blight."

By Jonathan V. Last

OCEAN AVENUE runs, with only a few interruptions, more than 40 miles along the New Jersey coast, from the northern tip of Long Beach Island all the way up to the southern entrance to Sandy Hook Bay  the effective end of the Jersey shore.

Driving north on Ocean Avenue, you're never more than a few feet from the beach, and the small towns whip by quickly, each with its own peculiar character. There's the Richie Rich enclave of Sea Girt with its multimillion-dollar mansions next to the merely wealthy town of Spring Lake, with its million-dollar homes. There's middle-class Belmar and working-class Bradley Beach. A little further north is tiny Ocean Grove  where the town's Methodist Church owns the land and leases it to homeowners. Next comes Bruce Springsteen's crumbling hometown of Asbury Park, where the girls comb their hair in the rearview mirrors and the boys try to look so hard. Go a few more miles still, and you arrive in Long Branch.

Long Branch was once a thriving resort town. From the 1860s until World War I, seven different U.S. presidents summered there. In 1869, Winslow Homer painted Long Branch, New Jersey, depicting a pair of Victorian women on the bluffs overlooking the surf. But, as the years passed, Long Branch declined.

Part of the decline was an unexpected consequence of urban planning. In the 1960s, in neighboring Newark, the city fathers began to experiment with public housing. They bulldozed much of the heavily Italian First Ward to clear space for housing projects. Newark residents fled to the suburbs. Some could afford the ritzier towns in Monmouth County; those of more modest means chose places such as Long Branch. By 1965, the influx of working-class residents finished off much of what remained of Long Branch's resort culture. Downtown businesses moved out, and the town went into further decline, which wasn't helped when, in 1987, the town's last tourist attraction, a large pier on the boardwalk, was destroyed in a fire.

Today, however, Long Branch is on the brink of a rebirth. Young people with wads of disposable income are flocking to it; upscale businesses  trendy coffee shops and hip designer boutiques  are back. These victories are the fruits of 12 years of planning done by the mayor, city council, and a consortium of local businesses. It is a testament to the power of eminent domain, as blighted old neighborhoods were bought up and cleared to make way for the new developments. But, while Long Branch may look like a success story, it is actually a cautionary tale.

The traditional American understanding of eminent domain is summed up in the text of the Fifth Amendment, which places two limits on the power of federal and state governments to take private property. Land can be taken only "for public use"  a new highway, for instance  and it cannot be taken "without just compensation." Last year, in a controversial 5-4 decision known as Kelo v. New London, the Supreme Court upheld the extremely elastic definition of "public use" that undergirds most modern urban renewal schemes  namely, that a private developer's promise of "increased tax revenue" counts as a "public purpose." In other words, simplifying only slightly, the government can compel you to sell your house to a developer who promises to build a more expensive one. In the wake of the Kelo decision, Long Branch is a case study in what the use  and the abuse  of eminent domain means to middle-class America.

WHEN THINGS WENT AWRY for Long Branch after the 1960s, the city of 31,000 hollowed out. Drugs became rampant, much of the town fell into disrepair, crime took hold. It got so bad that, on February 21, 1994, in the middle of a heated mayoral election, a drug-related riot broke out, with a crowd of 300 residents throwing bottles, vandalizing cars, injuring two police officers, and burning down two vacant homes. Five rioters were arrested, and Mayor Adam Schneider was forced to declare a curfew. Schneider won reelection in 1994 and is still mayor today. From that hotly contested race, the plan to redevelop Long Branch was born.

Schneider had long been a proponent of redevelopment, and in 1994 the stars began to align. The Monmouth County beaches, diminished from years of erosion, were about to get a facelift, courtesy of the Army Corps of Engineers. A group of some 40 local businessmen headed by Robert Furlong, who owned a number of local clothing businesses, had just established a private redevelopment arm, Long Branch Tomorrow, to help goose the process.

Furlong's group raised $165,000, and used the money to hire the Boston urban design firm of Thompson and Wood. Long Branch was playing in the big leagues: Thompson and Wood had been responsible for redesigning Baltimore's HarborPlace, Boston's Faneuil Hall, and Washington's Union Station, among other projects. According to Planning, the magazine of the American Planning Association, Furlong made this move "entirely on his own." Over the next seven months, planners from Thompson and Wood met with members of the Long Branch government and Long Branch Tomorrow more than 20 times to discuss what redevelopment of the town's coastline might look like. In July 1995, they delivered their master plan, a slick, 67-page document that outlined a dramatic vision.

The basic idea was to take 135.5 acres of land along the ocean and turn it into a mixed-use, urban renewal utopia, complete with bike paths and walkways and condominiums and high-value commercial zones. The plan called for private developers to invest nearly $1 billion in creating residential and business units and another $16 million in "public improvements" for the beachfront area. The document was public, and some residents  particularly those in the prospective redevelopment zone  were nervous. But the master plan was filled with reassuring language. "Not by sweeping reform but by an incremental process, new buildings and blocks will fit in among the old," it promised.

"To avoid the clean-sweep practices of contemporary urban renewal yielding antiseptic uniform 'projects,'" the plan continued, "we recommend an incremental approach that is rather like repairing a valuable patchwork quilt." On the proposed map, some of the land was slated to be remade in its entirety; other portions were marked as "residential infill."

One such "infill" neighborhood, known by the unwieldy acronym MTOTSA (for Marine Terrace, Ocean Terrace, and Seaview Avenue, the three streets which bound the area), was a refuge for longtime homeowners. Unlike many other parts of Long Branch, the MTOTSA neighborhood was still an enviable place to live. It wasn't chi-chi, but its 37 well-cared-for properties, home to both retirees and working families, made it one of Long Branch's last middle-class enclaves.

Since the MTOTSA neighborhood was marked for infill, not demolition, on the plan's colorful maps, there was no great objection to the master plan. Amid all the happy talk, a single sentence, buried on page 29, might have set off alarms in the mind of a wary citizen. There the master plan recommended "small-parcel infill with the option of upgrading and densifying existing dwellings to multi-family units." No one noticed this important modifier.

The city of Long Branch adopted the plan.

THAT WAS ONLY THE FIRST STEP. Since the late 1970s, developers along the Jersey Shore have been forced to deal with the state's byzantine Coastal Area Facilities Review Act, administered by the state Department of Environmental Protection. By forcing developers through a rigorous clearance process, the act often slows down redevelopment in beach communities. According to Planning, the Long Branch planners "decided that the only way to 'beat' CAFRA was to change it. They believed the agency could be persuaded to give the Long Branch plan blanket approval." They were right. In May 1997, after two years of lobbying, the state ceded its CAFRA authority to Long Branch. In effect, the city of Long Branch was now responsible for signing off on the environmental protections for its own project. The setup was unprecedented and so attractive that five developers immediately submitted plans.

Two years later, the city council selected its developer: Applied Development, of Hoboken, New Jersey. For the president of Applied, Joseph Barry, the deal was a labor of love. His son, David Barry, told NJ Biz that when Joe was a teenager he spent his summers in Long Branch. "Nostalgia" was one of the reasons Applied bid on the job, David said.

Of course, there were other reasons. Governor James McGreevey, at the groundbreaking ceremony in April 2002, reaffirmed an $11.2 million pledge in state aid to Long Branch. The city in turn sold some parcels it owned to the developer at below-market value, and then helped arrange $18 million in state low-interest loans to acquire other properties, paving the way for a condo development known as Beachfront North Phase I. To help with the project, Applied brought on a partner, Matzel and Mumford, a subsidiary of development giant K. Hovnanian.

In Phase I, Applied acquired 140 homes. Most of the residents went quietly. After all, in a February 2000 Asbury Park Press article, Joseph Barry had warned, "The holdouts will be losers." Nonetheless, some residents held out, causing the city to invoke its power of eminent domain. Bruce McCloud was a loser. Forced out of his home a few days before Thanksgiving, he was put in a motel and given $140,000 as "fair compensation" for his 17-room Victorian house, 400 feet from the beach. Many other homeowners were given similarly meager compensation. For instance, Fred and Dorothy Strahlendorf were given $179,500 for a house 235 feet from the beach. Twenty-one homeowners sued the city after the fact, with varying degrees of success. The Strahlendorfs, for instance, had their compensation adjusted upwards to $500,000.

On the land acquired in Phase I, the developers built not the glorious, integrated residences imagined by the master plan, but a series of bland, cookie-cutter condos and townhouses  a total of 283 units, which sold for between $600,000 and $1.2 million.

THERE WERE OTHER UNPLEASANT SURPRISES in store for residents who had been impressed by the original master plan. Somewhere along the way, the MTOTSA neighborhood was marked for "redevelopment"  not infill. Thirty-eight homes were about to be obliterated, against their owners' wishes. No formal announcement was ever made about the change of plans, but MTOTSA residents noticed strange signs  the first of which was that they could no longer get city permits to improve their homes. For instance, when Denise Hoagland sought a permit to lift the roof of her house in 2000, her application was denied. After she was rejected, the city asked her to sign a waiver saying that if she did raise her roof, she would waive her right to compensation should redevelopment occur.

By November 2003, the city had all but given up the pretense that the MTOTSA neighborhood would be spared in the next round of redevelopment. Residents presented the council with a petition with 500 signatures protesting Phase II. Mayor Schneider took a sympathetic stance: "We're going to get you involved in the process," he told the Asbury Park Press. "Let's hear [residents'] ideas about how and why their homes can be saved." MTOTSA homeowners provided the city with an alternative plan, which the city council rejected.

In January 2004, residents met with Schneider and Paratap Talwar, the Thompson and Wood designer who had authored the master plan. According to the press account of the meeting, Talwar explained that, contrary to the vision of his original plan, razing the MTOTSA homes was "necessary to the success of the plan." Schneider, for his part, claimed to have done the homeowners a favor. The Asbury Park Press reported that the mayor thought "the city could have acquired the homes in 1997 when the development was getting under way, but instead allowed those residents to reap the benefits of redevelopment." According to a report in the Asbury Park Press, however, Schneider told an October 2004 city council meeting that the plan couldn't be changed because "the city in 2000 signed a contract with the developer, and so any diversion from that would have to be consensual."

Residents, however, might have missed the mayor's flip-flops because of some distracting news: That same month, Joe Barry, the president of Applied Development, was sentenced to 25 months in prison. Barry had been caught making $115,000 in payoffs to the executive in neighboring Hudson County. In addition, he was fined and ordered to repay $1 million he had scammed from federal agencies. At the sentencing hearing, Barry's attorney argued for leniency based on his client's passion for "social justice." David Barry, the son, took over the helm at Applied. The redevelopment in Long Branch rolled on undisturbed.

BY 2005, THE EFFORT to save the MTOTSA neighborhood was gaining wider attention. A February rally drew 250 eminent domain protesters to Long Branch. The New York Times and National Public Radio both did stories about the fight. The town council, girding for a legal battle, began doling out contracts to law firms. At an April meeting, the city awarded a $25,000 contract to the firm of Ansell, Zaro, Grimm, and Aaron  the Aaron of which was James Aaron, who also held the post of city attorney. A $75,000 contract was given to the firm of Greenbaum, Rowe, Smith & Davis to handle eminent domain proceedings. A month later, yet another firm was retained for $25,000. At a town meeting, after Aaron's firm was given an additional $30,000, a resident asked the city attorney who was paying for all of the lawyers. "The developers are funding it," he replied.

Which brought on an interesting moment in May, when a local weekly paper, Atlanticville, broke the story that Arthur Greenbaum, of Greenbaum, Rowe, had a personal stake in the redevelopment: He sits on the board of directors of Hovnanian Enterprises  the parent company of Matzel and Mumford, the developer that Applied had quietly let in on the action after winning the contract to remake Long Branch.

The city administration went into damage-control mode. Mayor Schneider flatly asserted that Greenbaum's dual roles "will not be a conflict of interest." Aaron, the city attorney, declared that "the interest of the city and K. Hovnanian are the same." Greenbaum held on for awhile, but in July "reluctantly" withdrew his firm as counsel, insisting there was "no basis to suggest that the city has been engaged in 'impermissible favoritism.'"

Meanwhile, the city negotiated with MTOTSA residents, to little avail. One resident was offered $625,000 for his house  a property that includes rental units. Three others were given offers in the low $400,000s. One of these, by way of example, is an 1,800 square-foot bungalow with ocean views, a block from the beach. Six offers were in the low $300,000 range; one, a two-story cottage a block and a half from the ocean, was for $210,000. The offers were not comparable to local real estate prices on the private market. Over the last three years, one local reporter calculated, the average sales price of single-family homes in Long Branch was $464,507. As of December, there were 103 active listings in Long Branch with an average asking price of $658,773; few of these boast the ocean views enjoyed by many of the MTOTSA homes.

Nonetheless, the city moved ahead with its eminent domain proceedings. The Newark Star Ledger explained the Orwellian nature of the affair: "The city has already declared these homes 'blighted,' although they are neat bungalows and ranch houses with solid roofs, carefully tended lawns, and flowerpots on porches." The reason for this declaration of "blight"? "Under New Jersey law . . . towns are allowed to seize only blighted properties." The irony, of course, is that the MTOTSA neighborhood is one of the few sections of Long Branch that isn't blighted.

As the fight intensified, some local politicians rallied and held a fundraiser for MTOTSA. Mayor Schneider began to come unhinged. "You can't do [massive redevelopment] on a patchwork basis," he protested, abandoning the comforting "patchwork quilt" metaphor in the city's master plan. In another fit of pique, Schneider said that the MTOTSA residents had only themselves to blame. They should have lawyered up as the city did: "If they had gotten proper legal representation and put together a plan to oppose this project when we began to study it in 1995," he explained, "it's likely this project never would have passed." The mayor had a good point. Which may be why the original plans went out of their way to reassure residents their homes would be safe.

Perhaps sharing his imprisoned father's passion for "social justice," developer David Barry described the residents as "opportunists looking for higher prices for their property, or the limelight."

In December, Long Branch filed a complaint in state Superior Court asserting its right to take the MTOTSA properties. It wants to bulldoze them to make room for 185 more condominiums. Atlanticville's Greg Bean predicts that the units will sell for between $400,000 and $2.2 million. "The total amount offered to MTOTSA property owners named in the complaint," Bean writes, "is just south of $4.1 million." The residents of MTOTSA are fighting back, and the beginning of the court brawl is scheduled for February 24. The homeowners have worked closely with both local counsel and with the Washington-based Institute for Justice, which represented Susette Kelo in her case against New London, Conn., which ended up before the Supreme Court last year.

The leaders of Long Branch are undeterred by a court fight. Four days before Christmas, the city council authorized another $300 million redevelopment zone, Beachfront South, which will empower K. Hovnanian to raze 30 properties in 2007 and replace them with 352 condos, priced from $600,000 to $1.2 million. Some of the doomed properties present an even stranger picture of "blight"  big, beautiful houses facing the ocean, with nothing between them and the beach except wide, rolling lawns. They would not look out of place in a Homer painting.

In many ways, Long Branch is the perfect storm of the Kelo era: a misleading master plan, an unprecedented exception from state environmental regulation, shifting redevelopment zones, a developer jailed for corruption, a lawyer working both sides of the deal. New Jersey residents are particularly vulnerable to this kind of forced redevelopment. As the Institute for Justice's Scott Bullock explains, the prime targets for developers are typically low to middle-income communities with waterfront homes within commuting distance of a major city. New Jersey is essentially two giant suburbs  of New York and Philadelphia  with an enormous coastline, as well as numerous interior rivers. That's why there are redevelopment clashes shaping up all along Ocean Avenue  in Belmar, Neptune, Asbury Park, and other towns. Currently 64 municipalities in New Jersey are pursuing redevelopment through the power of eminent domain, with developers trying to seize homes everywhere from Camden to Stanhope.

When Justice Sandra Day O'Connor wrote in her Kelo dissent that "the specter of condemnation hangs over all property," she wasn't scaremongering. No one wants to use eminent domain to redevelop the parts of Long Branch that are actually blighted  such as, for instance, the abandoned building across from city hall. The logic of Kelo-style takings is to redevelop attractive land  regardless of who lives there.

Now that the Supreme Court has declined to protect homeowners, that duty has fallen to the states, with mixed results. Six states have already held that "public purpose" economic condemnations are constitutional. Nine have decided that they are not. The other 35 are scrambling to figure out the politics of the issue.

In New Jersey, the MTOTSA residents are hoping for salvation from the courts, but if that fails, they may find relief in the political process. Last fall, state senator Diane Allen proposed legislation for a two-year moratorium on eminent domain takings. That measure stalled, but during the gubernatorial race, candidate Jon Corzine also made noises friendly to the idea: "My principle on this issue is a simple one," he explained. "There should be no taking of homes for economic development except in rare and exceptional circumstances." Now that Corzine has been sworn in as governor, it remains to be seen how he defines "exceptional circumstances."

In Long Branch, it isn't clear that redevelopment has made anyone happy. The intricate, flavorful visions of the master plan have been realized as drab monoliths that look uncomfortably like Yuppie versions of Soviet-era housing projects. One wonders if the townsfolk will find the benefits enough to make the project worth the trouble. Even the master plan's idealistic projections envisioned only an extra $7.8 million in new tax revenues, and the "public use" features are modest: A series of "gateways" by the boardwalk that will house restrooms and storage space; one of them will host a concession stand. Robert Furlong, who conceived the Long Branch plan, died in 2000, before even one of the condominiums he had fought so hard for was built.

For his part, Mayor Schneider has internalized the struggle. He refers to himself as the "poster child" for Kelo protesters. In a recent speech to New Jersey's League of Municipalities, he boasted, "Six months from now, I'm going to run again. I don't know if the Institute of Justice [sic] is going to fund the campaign against me, but I can live with that." The event was sponsored by K. Hovnanian.

As they wait to learn their fate, the longtime residents of MTOTSA are worried and dismayed. As 79-year-old Anna Defaria told the Star Ledger, "We lived through the slum era and this is the thanks we get."

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